First published on the Brett Wilson Crime, Fraud and Regulatory Law Blog on 30 January 2017
Following a four year investigation into corruption and bribery, the Serious Fraud Office (‘SFO’) have entered into a Deferred Prosecution Agreement (‘DPA’) with Rolls Royce Plc, the global engineering giant. The agreement was approved by the High Court on 17 January 2017 and, in effect, allows Rolls Royce to account for its conduct without facing the ramifications of a full criminal prosecution. The full High Court judgment and the DPA can be found here.
The SFO were granted the power, under schedule 17 of the Crime and Courts Act 2013, to enter into DPAs with corporate bodies in 2014. The DPA in the instant case is the third of its kind following Standard Bank (who were indicted for failure to prevent bribery) and a second anonymised company still in the midst of proceedings. The agreements effectively put a criminal prosecution for fraud, bribery or other economic crime ‘on hold’ if the terms are adhered to. Although entered into voluntarily, the agreements require judicial supervision and approval (to ensure that they are fair, reasonable and in the interest of justice) before they become effective. If the company breaches the terms of the DPA, the SFO reserve the right to launch a full criminal prosecution.
The practice of bringing companies to account through this method is in its early stages. Examples of terms have been monitoring ethical compliance by a regulator and a fine akin to that of conviction following a guilty plea. There is an obvious public interest in these agreements, in that full criminal sanctions and reputational damage could cause the loss of jobs, make the share price of the company plummet and ultimately seriously affect individuals that were not aware of any wrongdoing. Further to this, the public purse is saved from a lengthy and costly trial. The DPA does not prevent the prosecution of individuals within the companies. To the contrary, it can be used as a means of securing the company’s cooperation with such prosecutions.
In the instant case, the SFO launched an investigation into Rolls Royce in 2012 following allegations of corrupt practices and bribery. The investigation focused around a number of civil and military deals primarily in Indonesia, Thailand, India, Russia, Nigeria, China and Malaysia. The deals in question had involved suspicious payments made by company employees or middle-men to secure Rolls Royce as the winning bidder. The company was indicted with 12 counts including conspiracy to corrupt, false accounting and failure to prevent bribery. The investigation by the SFO ran alongside similar lines of enquiry in the United States and Brazil. Rolls Royce fully cooperated with the investigation and have stated on their website that ‘the practices that have been uncovered do not reflect the manner in which Rolls Royce does business today.’ The use of DPAs is not free from controversy. The Director of the NGO Corruption Watch UK has commented that this DPA is further ‘proof the UK is not willing to prosecute a large politically connected company.’
The company has agreed to pay £497.25m in fines and disgorgement of profits and £13m in SFO costs. Sir Brian Leveson, president of the Queen’s Bench Division, who approved the DPA noted that these figures reflected the gravity of the conduct that was uncovered and the fine was comparable to that payable following a guilty plea. As part of the DPA the company has also agreed to cooperate fully with the prosecution of individual directors or employees who had contributed to the offending conduct. The judge commented that the DPA was appropriate in the circumstances as Rolls Royce was a ‘dramatically changed organisation’ which, along with the agreed sanctions, would feel the effect of the adverse publicity that would inevitably follow.
Rolls Royce have entered into a similar agreement with the United States Department of Justice and a leniency agreement with the Minesterio Publico Federal in Brazil.
DPAs are in their early years and we have yet to see how they will evolve and how often they will be utilised by the SFO. We also have yet to see what will happen if the terms are breached and the ramifications of prosecution that follows.